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Gold and silver have crept
quietly higher over the course of the last week, with growing signs of a shift in
investor sentiment away from
perceived safe havens towards growth or “risk” assets. The yield
on the 10-Year US Treasury Note has been a notable indicator of this, moving
from around 1.4% in late July all the way to 1.8% today. This is still below
the yields seen in March, but the rapidity of the rise (coupled with the US
dollar’s continuing struggle to gain momentum) suggests that markets
could be in for a bullish spell.

Inflation expectations are also
rising, which should tempt speculators back into the commodities sector. This
should have a notably bullish impact on silver; it won’t take much in
the way of speculative interest in the white metal to send it soaring higher
again, as discussed by James Turk in his latest King
World News interview. $50/oz by Christmas? Perhaps.

Rising prices will be partly a
consequence of manmade phenomenon – the racing certainty that major
central banks will be forced into more dramatic money printing escapades. It
is also because of natural events: the fierce draught in the American Midwest
that has forced crop prices to record highs. Either way, the result is the
same – a jump in commodity prices, followed by a spurt higher in
producer prices, and eventually a rise in consumer prices.

Gold was also helped yesterday
by news that the Chinese government is interested in buying a
controlling stake in the
FTSE gold-mining company African Barrick Resources
(LSE: ABG). This is just the kind of merger and acquisitions activity that
gold mining bulls have long been talking about as a precursor to a bull
market in the mining stocks (which have as a group underperformed gold
bullion over the last decade).

All in all, things are starting
to get exciting again in the precious metals markets.